(Bonds) Security deposits

A security deposit (bond), is an amount of money paid by a tenant and held by the landlord as a guarantee. This can also be in the form of a bank guarantee.

A security deposit gives the landlord a level of protection if the tenant fails to comply with their obligations under the lease agreement. It is not a legal requirement to have a security deposit, however, it is common for lease agreements to include a security deposit.

A landlord or an estate agent acting on behalf of a landlord is required to hold the security deposit in an interest-bearing account. For the term of the lease, the landlord is entitled to hold the interest as part of the security deposit.

If a tenant has met their obligations under the lease, the landlord must return the security deposit and any interest earned to the tenant within 30 days of the lease ending. The landlord must also account for the interest earned (e.g. by providing account statements to the tenant).

Any dispute concerning its return can be referred to the Victorian Small Business Commission (VSBC) for dispute resolution, for example, if the security deposit (and any accrued interest) is not returned or only part of the amount has been returned.

Negotiating a security deposit

The security deposit requested by a landlord can be equal to one or more months’ rent. The dollar amount of a security deposit is not regulated by retail leases legislation, and landlords and tenants should negotiate a mutually agreeable amount.

Accounts holding security deposits

The Retail Leases Act 2003 does not specify a special type of bank account required to hold a tenant’s security deposit.

Some banks may have special products for the purposes of holding security deposits, however, most banks can accommodate the landlord’s requirements.

Most banks are aware of this landlord obligation. Landlords should discuss their needs with their bank or credit union.

Security deposit information

By law, a security deposit for a retail lease must be held by the landlord in an interest bearing account. Security deposits for retail tenancies are not reported to or lodged with the VSBC or any other body.

Case study

The situation: A retail lease has expired. The landlord’s agent has refused to refund the security deposit because the tenant needs to reinstate the premises to their original condition.

The process: The tenant provides reasons why the security deposit (bond) is being withheld. The agent has advised the tenant that repairs need to be done to restore the premises to its original condition. The tenant calls the VSBC for advice and speaks to a Dispute Resolution Officer for preliminary assistance.

The resolution: The tenant reviews the list of repairs to be done. The tenant believes many of these repairs are from normal wear and tear. The tenant and landlord agree to split the repair costs. The tenant is refunded half the original security deposit (bond).

More information

For more information, you can speak with a member of our team by calling 1800 878 964 or emailing us.


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